The EUR/GBP cross weakened to near 0.8530 during the early European session on Friday, with the Pound Sterling (GBP) strengthening against the Euro (EUR) following stronger-than-expected UK economic data.
According to data released by the Office for National Statistics (ONS), UK Retail Sales rose by 0.4% month-on-month in March, surpassing the market consensus of a 0.4% decline. This was a slowdown from the previous month’s revised 0.7% increase but still a positive surprise. On an annual basis, Retail Sales grew by 2.6% in March, outperforming the forecasted 1.8% and the previous month’s 2.2% rise. The upbeat data triggered immediate buying of the GBP.
On the other hand, the Euro faced downward pressure following dovish remarks from European Central Bank (ECB) policymakers. Finnish central bank governor Olli Rehn suggested that the ECB should not dismiss the possibility of a “larger interest rate cut.” Additionally, ECB Governing Council member Madis Muller indicated that the central bank might have to lower rates further if trade uncertainty continues to harm growth.
The GBP’s strength may face some resistance as investors turn their attention to developments surrounding US-UK trade talks. UK Finance Minister Rachel Reeves is set to meet with US Treasury Secretary Scott Bessent on Friday to discuss a potential trade deal. A successful agreement could help mitigate the impact of US tariffs on British exports, particularly in sectors like cars and steel. Reeves expressed confidence in reaching a deal, but any uncertainty surrounding trade policy could weigh on the GBP and provide a tailwind for the EUR/GBP pair.
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